The Supreme Court of British Columbia recently considered this in Hooge v. Gillwood Remanufacturing Inc., 2014 BCSC 11 (CanLII). They also considered whether the laid off employees refusal to accept a recall amounted to a failure to mitigate.
The plaintiff began his employment at the Mill, as a labourer, in 1975. He worked his way up to become the production supervisor. Despite several changes in ownership, the plaintiff continued to work as production supervisor. On August 6, 2011 the plaintiff was informed that he would be laid off effective on August 12, 2011. His lawyer wrote to the defendant on August 25, 2011 taking the position that the plaintiff had been constructively dismissed and was entitled to reasonable notice of termination.
The plaintiff commenced an action on September 12, 2011. The defendant recalled the plaintiff to work effective on September 19, 2011. The defendant refused the recall and did not return to work. As of the date of trial (April 29, 2013), the plaintiff had not found other employment.
The defendant took the position that the layoff did not constitute a constructive dismissal and, further, that the plaintiff failed to mitigate his alleged damages by accepting the recall on September 19, 2011.
Is the layoff a constructive dismissal?
The Court relied on Archibald v. Doman-Marpole Transport Ltd.,  B.C.J. No. 1284 (S.C.):
There is nothing more fundamental to a contract of employment than that the employee be employed and that he be paid for his services. Doman unilaterally changed those fundamental terms. One can appreciate the need for employers to cut down on management or supervisory staff during economic downturns but the employee, subject to contractual arrangements, is still entitled to reasonable notice or payment in lieu of notice.
The Court found that there was “nothing to suggest that there was a term of the contract of employment, either express or implied, which provided for layoffs of salaried employees, and it is clear that the plaintiff did not accept the lay-off.”
The defendant then argued that the BC Employment Standards Act allowed temporary layoffs. The Court rejected that argument relying on Collins v. Jim Pattison Industries Ltd. (c.o.b. Jim Pattison Automotive Group),  B.C.J. No. 1201 (S.C.) where the Court held:
… In my view, the Act does not grant all employers the statutory right to temporarily lay off employees, regardless of the terms of their employment contract. Rather than creating new rights, the Act appears to be qualifying employment agreements in which the right to lay off already exists. Therefore, unless the right to lay off is otherwise found within the employment relationship, the above cited sections of the Act are not relevant.
The Court held that the plaintiff was entitled to a reasonable notice period of 18 months.
Was the plaintiff’s decline of the recall a failure to mitigate
Relying on the leading case of Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (CanLII) the Court summarized the law as follows:
The law is clear that in certain circumstances an employee who declines an offer of re-employment from the same employer after having been dismissed, whether actually or constructively, may be found to have failed to mitigate his damages, and have any award reduced on account of such failure to mitigate. The employer has the onus to prove the offer to re-employ, and that a reasonable person in the position of the plaintiff would have accepted the offer.
* * *
Where an employee is dismissed from his or her employment, whether expressly or constructively, and the employer then makes an offer to re-employ, the employee faces a difficult decision. As the law recognizes, it may be difficult for the employee to return to the same or a similar job after he or she has been fired or constructively fired, but the question of whether or not it is reasonable to accept the offer will be determined on an objective basis, albeit a reasonable person in the employee’s position.
And the Court, following a detailed review of the evidence regarding mitigation made the following helpful observation:
Even if the offer to re-employ was motivated by a desire to avoid the payment of damages in lieu of severance, that does not make it reasonable to decline the offer. It seems to me that an employer who has laid-off an employee, or wrongfully terminated an employee without due notice, may very well come to the conclusion, particularly with the benefit of legal advice, that its actions constituted a wrongful dismissal and may seek to mitigate its own exposure to the payment of damages by offering to re-hire the employee. [Emphasis added]
Ultimately the Court found that the plaintiff failed to mitigate when he declined the recall to return to work. That being said, the defendant conducted further restructuring after the plaintiff’s recall which, the Court found, would have resulted in his termination in June 2012.
So, the defendant was liable in damages for the losses suffered by the plaintiff between August 12, 2011 (the effective date of the layoff) and September 19, 2011 (the date the plaintiff was recalled to work - which recall was refused). He was also awarded damages for the period from July 1, 2012 (the date he likely would have been terminated) and February 21, 2013 (the end of the reasonable notice period).
Again, the case is important as a further brick in the Evans wall. As the Court correctly points out, a terminated employee (irrespective of the motivations of the employer in doing so) who is offered re-employment with the employer is, indeed, in a difficult position: return to the same employer who fired you or reject the offer and face a “failure to mitigate” argument. While there are circumstances where a terminated employee can refuse an offer of re-employment with the same employer, those circumstances are fairly limited (albeit driven by the facts). Constructive dismissal cases are "high risk" for employees, in most cases.
This is a pretty helpful case for employers, though supports that a layoff can amount to a constructive dismissal depending, of course, on the circumstances.